The quantity theory of money:
A) describes the general relationship between money, velocity, real output, and prices.
B) presents the critical roles of money demand in regulating the level of prices.
C) derives the optimal quantity of inflation.
D) explains the equilibrium between money supply and money demand.

Question

Quizplus · Accepted Answer

The quantity theory of money primarily describes the relationship between the money supply, its velocity, the level of real output, and the price level, often summarized by the equation MV = PY.

The Quantity Theory of Money